Dear customers,
Further to our publication regarding the approval of the transfer pricing bill[1], the transfer pricing regulations have now been approved[2] as a complement to the process of streamlining the supervision and control procedures of the Israeli Tax Authority (“ITA") in the field of transfer pricing (along with changes led by other tax authorities around the world).
It is important to draw attention to one of the changes, which related to the deadline granted to the taxpayer to submit the required transfer pricing documentation (as presented below) in response to a specific request from the ITA.
On the one hand, the deadline was reduced from 60 days to 30 days, and on the other hand the documentation requirements were broadened.
The following table presents the main points from the amended regulations (along with the approval of the legislation that took place a few months ago), regarding the update to the documentation requirements.
| Type of documentation | Characterization of the documentation | Status |
| Master File |
A transfer-pricing document that includes comprehensive information regarding the multinational group as a whole. |
Valid for the 2022 tax year and relevant to a multinational group, whose consolidated turnover exceeded 150 million NIS in the tax year preceding the reporting year. Upon receiving a request from the ITA, the taxpayer has 30 days to submit the requested documentation. |
| Local File | Upgrade documentation requirements. Examples of the documentation upgrade include, inter alia, the following: 1. Description of the taxpayer's organizational structure. 2. A detailed explanation of the key personnel in the multinational group to which the taxpayer is subordinate, including details of their functions and the geographical location of their offices. 3. A list of the taxpayer's main competitors, if any. |
Valid for the 2022 tax year Upon receiving a request from the ITA, the taxpayer has 30 days to submit the requested documentation. |
| CbCR | An inter-state report that will be submitted in Israel by the ultimate parent entity resident in Israel, that includes comprehensive and detailed information on all entities within the multinational group. | 1. There is a possibility, under certain conditions, that another entity in the group will submit the report in its local jurisdiction. 2. There is a possibility, under certain conditions, that an Israeli resident entity will be required to submit the report even though it is not the ultimate parent entity of the group. Applies to a multinational group whose turnover in the tax year preceding the reporting year exceeded NIS 3.4 billion. The requirement applies to the 2022 tax return, but the report may also be submitted voluntarily for the 2021 tax return — until 31/3/2023 |
The new documentation requirements are in continuation to the upgrade to the transfer pricing form (1385) attached to the tax return, and to Income Tax Circular 1/2020 published in June 2020, which specified the conditions required to comply with the provisions of Section 85A of the Income Tax Ordinance and related regulations.
For further details and assistance, please contact:
C.P.A. (Adv) Amit Shalit, Partner and Head of Transfer Pricing
By email: AmitS@bdo.co.il or by telephone: 052-6008056